The Brief Summary Of Cost Per Click


The cost-per-click (CPC) model refers to the amount that an advertiser has to pay in advertising costs when pay per click (PPC) is chosen as the advertising method. When you use PPC, the actual amount that internet advertisers need to pay is based on a variety of factors. CPC is considered one of the most popular pricing methods, which is especially used in search engine advertising.

Calculating The Cost Per Click

The CPC model has a system in place that accepts ads, which are allocated by auction. The participation of advertisers is crucial as they are the ones that indicate the maximum amount they are willing to pay for each click on their ad. Using this system, you’ll also have to keep in mind that the higher you bid, the greater your chance of getting a good advertising space. (Keep in mind that this is only one of the factors of ad ranking, but is not a solution to poor advertising practices.)

So how does Google determine the advertiser who secures the best advertising space? Google considers the expected value to the customer as the main determining factor. The bid amount along with other factors will be assessed to find out who will be awarded the best advertising space.

Of course, you can always bid higher because it improves your chances of success. This doesn’t mean that the price you’re willing to pay is the sole determining factor because quality score, keywords, and the website destination are the main metrics used to determine your cost and ranking.

What’s the maximum bid?

There is no amount as a cap to what you can bid for a click but keep in mind that there is only so much that a higher bid will help. When it comes to the maximum amount you can bid, Google provides advertisers the freedom to dictate what their maximum bid is going to be. Through doing research and looking at your reporting, you can maximize the benefit of higher bids.

How do advertisers bid for the amount?

The bidder or advertisers can either submit bids to Google automatically or manually. If you choose automatic bidding, Google Adwords will determine the ideal bid which is suitable for your budget. The bidder sets a maximum daily budget and Google will select the strategy that allows the ad to generate the highest number of clicks.

With manual bidding however, the bidder directly decides the maximum amount they are willing to pay for clicks, keywords, and ad groups. If you want to maintain control of your bids, manual bidding will give you this freedom, but you need to put in more time & effort in setting up your bids. Once you submit the maximum bid, Google will take this into account with the other factors to determine the bidders advertising space. Once you start running the ads, the results of your CTR (Click Through Rate) will end up affecting the CPC as well.

So for instance, Bidder #1 and #2 are given the same Quality Score. Bidder #1, however bids $10 while Bidder #2  bids $5. Bidder # 1 wins the auction because of the maximum bid of $10. Although the maximum bid was $10, bidder #1 will only pay a little bit above $5 because the actual CPC has been based on the next lowest bid.

Some bidders use AdWords software to get observations and analyze their bidding rivals. The software provides useful information like how often prospects view ads, the people who are bidding, how much they are bidding, and what they are bidding on. However, you can’t see the amount that a competitor’s CPC bids or the amount paid for the advertising space. www.SemRush.com is one website that provides a lot of valuable information and tools to online marketers!

We hope you enjoyed reading and if you are looking for a team member to help your business get better results, give us a call or send us an email! Have a great day!

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